2025 (8) TMI 1441 - HC - Income Tax

Delay of 522 days in filing Form No.10 condoned under s.119(2)(b) due to inadvertent chartered accountant error

St. Anne’s Church Versus Commissioner of Income Tax (Exemptions) and Ors.

St. Anne’s Church Versus Commissioner of Income Tax (Exemptions) and Ors. - 2025:BHC - OS:14120 - DB ISSUES PRESENTED AND CONSIDERED 1. Whether delay in uploading/Form No. 10 (for accumulation under section 11(2)) can be condoned by the tax authority under section 119(2)(b) where the Form was not filed before the due date of the original return. 2. What constitutes 'reasonable cause' for condonation of delay in filing Form No. 10 - specifically, whether an inadvertent omission by the Trust's Chartered Accountant, supported by an affidavit filed in subsequent writ proceedings (but not before the original authority), suffices. 3. Whether the Court may exercise writ jurisdiction to quash an order refusing condonation under section 119(2)(b) and itself condone delay where denial would cause grave hardship to a charitable trust claiming exemption under section 11. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Power to condone delay under section 119(2)(b) in respect of Form No. 10 Legal framework: Section 119(2)(b) confers power on the tax authority to condone delay where sufficient cause is shown; Form No. 10 is the statutory mechanism to record accumulation under section 11(2) for claiming exemption. Precedent Treatment: No judicial precedents were invoked or applied in the judgment; the Court proceeded on statutory principles and facts. Interpretation and reasoning: The Court treated section 119(2)(b) as enabling a discretionary remedial power to forgive procedural non-compliance where sufficient cause exists. The requirement that Form No. 10 be filed before the due date of the original return is a statutory expectation, but non-filing is not treated as an absolute bar to relief where the authority has discretion and circumstances justify condonation. Ratio vs. Obiter: Ratio - The authority's discretion under section 119(2)(b) extends to condoning delayed filing of Form No. 10 where reasonable cause is established; Obiter - procedural emphasis that electronic filing requirements are newly introduced and may be a factor in assessing inadvertence. Conclusions: The Court concluded that condonation under section 119(2)(b) is available in the facts of the case and that denial by the authority was susceptible to judicial interference. Issue 2 - Sufficiency of 'reasonable cause': inadvertent omission by Chartered Accountant and late affidavit Legal framework: The test for 'reasonable cause' involves assessing whether the explanation for delay is credible and whether denial would produce undue hardship; evidentiary support for assertions is relevant to the exercise of discretion. Precedent Treatment: The judgment did not reference or distinguish previous decisions setting standards for 'reasonable cause'; the Court applied broad equitable considerations based on record materials. Interpretation and reasoning: The Court examined the factual narrative: a paper Form No. 10 was prepared and signed at the trustees' meeting; the return of income was filed within time; the CA inadvertently failed to upload the electronic Form No. 10 (a recently introduced electronic requirement); and an affidavit by the CA, filed in the writ petition, corroborated these facts. The authority had rejected the condonation application noting absence of proof of assertions; the Court accepted the CA's affidavit as establishing inadvertence and reasonable cause despite that affidavit not having been before the authority. The Court emphasized the trust's vulnerable position and that penalizing a charitable trust for an inadvertent professional omission would cause grave hardship. Ratio vs. Obiter: Ratio - An inadvertent omission by a responsible professional, corroborated by credible affidavit, can constitute 'reasonable cause' for condonation under section 119(2)(b), even if the affidavit was filed first in subsequent writ proceedings; Obiter - the Court's sympathy for charitable institutions and the characterization of electronic filing as a recently introduced procedural requirement. Conclusions: The Court found that the explanation (inadvertence by the CA) supported by the affidavit satisfied 'reasonable cause' and warranted condonation; rejection for lack of proof was set aside. Issue 3 - Scope of writ jurisdiction to quash authority's refusal and to exercise discretion directly Legal framework: Judicial review permits quashing administrative acts that are unreasonable or where discretion is exercised without proper appreciation of facts or law; courts may reinstate or grant relief where discretion is shown to have miscarried. Precedent Treatment: The Court did not invoke specific supervisory authorities but proceeded on established principles of judicial review and remedial discretion. Interpretation and reasoning: The Court found that the authority's refusal was based on an absence of proof which the record, as supplemented by the CA's affidavit in the writ, remedied. Given the nature of the claim (exemption for a charitable trust) and the consequences of refusal, the Court exercised its jurisdiction to quash the impugned order and to condone the delay itself. The Court reasoned that allowing the trust to be deprived of exemption solely on account of an inadvertent professional lapse would be inequitable. Ratio vs. Obiter: Ratio - Where an authority refuses condonation on a record that is shown (in judicial proceedings) to be incomplete or where credible evidence of reasonable cause is forthcoming, the Court may quash the refusal and condone the delay; Obiter - the Court's comment on the absence of costs and the manner of signing and circulation of the order are procedural adjuncts. Conclusions: The writ was allowed; the impugned order was quashed and the Court itself condoned the delay in filing Form No. 10. Cross-References and Practical Outcomes 1. Issues 1-3 are interlinked: the statutory discretion under section 119(2)(b) (Issue 1) and the assessment of reasonable cause (Issue 2) determine whether judicial intervention (Issue 3) is warranted. The Court treated the CA's affidavit as filling the evidentiary gap identified by the authority, thereby justifying intervention. 2. The controlling legal principle established by the Court is that procedural non-compliance in statutory filings may be condoned where inadvertence by a professional advisor, corroborated by credible evidence, and the potential hardship to a charitable trust together demonstrate reasonable cause; administrative refusal on narrow evidentiary grounds may be quashed and relief granted by the Court.